Luxembourg City Skyline

Luxembourg Offshore Company Formation.

luxembourg flagLuxembourg offshore company formation.

The Grand Duchy of Luxembourg is located in the centre of Europe and is considered to be the major business and financial centre of the world economy.

The main feature of Luxembourg’s economic development is the attraction of foreign investment. The country has a developed financial services sector with more than two hundred thousand of banks and investment funds.

One of the main reasons for that is the favourable tax and corporate law of Luxembourg. Preferential tax rates have attracted a lot of foreign companies in the form of investment funds, insurance companies and even ships. Recently, there has been a growing interest for businessmen around the world in registering their company in Luxembourg for the obvious tax benefits. As of July 2013 Luxembourg has 64 operating agreements to avoid double taxation. The concept of “offshore company”, however, is not mentioned at the legislative level of the country.

luxembourg flagLuxembourg Offshore Company Formation. The most important legislation of Luxembourg for offshore companies:

  • Acts of July 28, 1923; July 27, 1972; and December 6, 1992 provide a partial exemption from corporate income tax for companies contributing to the economic development of the country.
  • In 1977 introduction of tax relief on investments in depreciable fixed assets
  • In March 1989 the issue of policy on banking secrecy, the disclosure of which is punishable under the criminal law
  • In 1990 abolishment of exchange controls

luxembourg flagOffshore, of course, is not used here in the full sense of the word, as in offshore BVI and Belize, where e.g. there is no requirement for the delivery of reporting and auditing. Nevertheless, in Luxembourg the audit can still be avoided with a certain amount of turnover or annual balance sheet or if the company has less than fifty people. Furthermore, a company registered in Luxembourg does not obtain a status of an offshore company, but it is able to obtain the desired tax benefits.

luxembourg flagThere are three types of companies that can be registered in Luxembourg:

  1. Classic holding company. When you registering a holding company you will get a status of a closed joint stock company with at least two shareholders. When incorporation of Directors shall be three. Whether they are resident or not, does not matter. Nominee shareholders are allowed, but with the requirement of an annual meeting in the territory of the Duchy. In the event that your company is registered as a qualified holding company, it is fully exempt from income tax. , But you will not have the right to conduct commercial activities. To be both a holding company and conduct business in Luxembourg prohibited.
  2. A Luxembourg based company with the usual provisions SOPARFI. One of the most common mechanisms for the management of the holding and finance business are SOPARFI (Société de Participations Financières), established for the purposes of asset ownership and direct investments. Such a company may be established in the form of SA, SARL or SCA.
  3. Commercial and industrial companies. The standard rate of corporate income tax for ordinary commercial enterprises resident in Luxembourg on income, net of municipal taxes, up to 40 %. Income from organisations – up to 39 %. Dividend – 15%. The transfer of licensing rights – 10-12 %. Tax on the accrued interest are not available.

The first two companies are used most often for cost optimisation. 

luxembourg flagOffshore can be recorded in several forms:

  • public company with limited liability (SA),
  • private company with limited liability company (SARL),
  • partnership with unlimited liability (SENC),
  • limited partnership with the release of , or without issuance of shares (SCS and SCA).

luxembourg flagOverall, the main benefits of registering a company in Luxembourg include:

  • High level of confidentiality
  • Absence of currency controls
  • Double Treaty Agreements with numerous countries
  • Issue of shares as bearer and registered
  • No special requirements for the directors and shareholders of the companies
  • Direct access to the local stock exchange